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Okay, unless something really drastic happens, just this one more day of bond market stories, and then that's it. From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Ristall. It is Thursday, today the 22nd of May. Good as always to have you along, everybody.
I'm going to oversimplify here for a minute as we get going, and I hope you'll bear with me. The stock market, as we all know, is, first of all, not the economy. But also, stocks are volatile. They go up and down seemingly without reason, and they do that a lot, especially in times of economic uncertainty, like right now. Bonds, though, are supposed to be the serious ones, the sober ones, steady, not prone to panic.
And while we don't, and I want to make sure you hear me on this, we do not have panic in the bond market now. There are things happening that are worth spending some time on. And one of the big reasons that bonds are worth spending time on right now isn't because of the benchmark 10-year Treasury note, which regular listeners of this program are well acquainted with. What's interesting right now is the long bond, the U.S. 30-year, where the yield, the interest rate the government is paying, jumped above 5% this week.
Marketplace's Henry Epp gets us going with the long end of the yield curve. The longer an investor holds U.S. Treasury bonds, typically they'll want a higher interest rate because a lot can change in 10, 20 or 30 years, says Kathy Jones, chief fixed income strategist at Charles Schwab, which is a Marketplace underwriter.
Those buyers definitely are looking at it as a riskier proposition. So 10-year, yeah, there's some risk premium in there, but not nearly as much as a 30-year. And right now, Jones says, investors see the U.S. as an increasingly risky bet in the long term. So anybody who's willing to buy, they want to get more yield to compensate them for their added risk. The reason is a lack of confidence in
and the U.S. Campbell Harvey is a professor of finance at Duke University. The downgrade of the country's credit rating by Moody's last week hurt that confidence. So has all the uncertainty with President Trump's trade policy. And then there's the ballooning federal debt. There's a perception that
that the U.S. is not going to get its fiscal house in order. Already, the U.S. has more than $36 trillion in debt. Add to that the tax and spending bill passed along party lines by the GOP House, and... It looks like the deficit will go up even more...
leading to even higher debt. Which would mean the federal government needs to woo even more investors to buy even more treasury bonds. But appetite for those bonds is waning, says Chuck Tomes at Manulife Investment Management. At an auction for 20-year treasury bonds this week... There was less demand from end investors than usual.
Less demand for greater supply of bonds could further drive up bond yields. And those rising interest rates flow through other parts of the economy because long-term treasury yields are closely linked to other kinds of debt, says Campbell Harvey at Duke. For the consumer, it's the mortgage rate. And for the corporation, it's their funding rate for evaluating capital projects.
So higher long-term yields mean buying a house could get more expensive. And so could the cost of capital investments by companies. Both, Harvey says, would be bad for growth. I'm Henry App for Marketplace. On Wall Street today, stocks, as it happens, barely budged. We will, though, of course, talk bonds as well when we do the numbers.
I'm going to start this next bit off by pointing out, just so we're all clear, that we are not, repeat not, in a recession right now. The people who actually decide when recessions start and end, members of the Business Cycle Dating Committee of the National Bureau of Economic Research, they say they look for, and this is a quote, "...a significant decline in economic activity that spread across the economy and lasts more than a few months."
I understand the Internet might have tried to convince you otherwise. We had a conversation about that, actually, in our staff meeting the other day. Social media posts that people had seen. Here are my recession indicators. Katy Perry going to space. Are liboboos an economic indicator for a recession? Sinners.
is a recession indicator. Get out of my office. Get out. So we called some actual economists to hear what they have been seeing out there. People deciding to elope instead of having weddings. Sale of single serving liquor bottles, nips. As a mom of twin two-year-olds, the diaper rash indicator is something that we actually talked about just this weekend at a party. That's Ethan Strube at Carleton College, Cara McDaniel at Arizona State, and Tabitha Knight at Willamette University.
The hard data, as we have been talking about on this program for a couple of months, shows us that right now the economy is actually pretty healthy.
The softer data, though, how people are feeling about things, tells us something completely different. Consumer sentiment, just for instance, hit a three-year low last week. Here's Cara McDaniel. Are you going to start talking about recession indicators when you feel really secure in your job and you feel, you know, hopeful about the future and the economy is on the right track? Probably not. And, says Ethan Strube, people are looking for external validation of their vibes, right?
Right. Catch is that that search for validation causes problems of its own. If we start to believe that the economy is not going to do well and we all start to cancel our spending plans and we all start to not invest in new businesses, then that becomes a self-fulfilling prophecy. That's one of the reasons why economists are so hesitant to say there's a recession coming up, because we don't want to actually cause what we were afraid was going to happen anyway. That was Tabitha Knight at Willamette right there. The thing is that
People, just like businesses, don't much care for uncertainty. And right now they're just looking for some idea of what might be going to happen. Ethan Strube, one last time.
My own personal recession indicator, which has no basis in reality, is people asking me, are we in a recession right now? Nobody wants to ask an economist anything unless they think the economy is not doing well. So when I start getting this question a lot from my students or from journalists, I'm like, oh, oh, boy. I will tell you, they ask journalists the same thing, too. You remember the vibe session from a couple of years ago? Kyla Scanlon, occasional guest on this program, pointing out the disconnect between feelings and data. That's kind of where we are right now.
And believe me, we'll tell you when it changes. The National Association of Realtors said today sales of existing homes fell 2% last month compared to April a year ago. And the supply of homes for sale is up, up more than 20% to the highest it's been in almost five years.
Had you been thinking then that the traditional spring home buying season would turn residential real estate around or maybe just give it a little boost? Clearly, that's not what's happening. Marketplace's Amy Scott has been watching the housing market a little more closely than usual of late.
Real estate broker Dee Chancho is showing a family of four a house for sale in Denver. So girls, this would be your bath here. All right. There's two bathrooms upstairs. Yes. The kids race to claim there would be bedrooms. This room is already purple. And figure out where their mom could record her radio stories. This could be your office. And look, there's a closet. Yeah. And then
Yep, this is my family. After years of following the housing market as a reporter, I'm now in the market. And what I'm seeing is playing out in much of the country. There are a lot more houses for sale. In Denver, Dee says, listings were up almost 20 percent in April compared to last year. So there's a lot more to choose from.
And the median price of a single-family home is only up 1%. Dee says average annual appreciation for the area going back 30 years is 6.5%. The fact that they've only increased 1% from this time last year is a significant slowdown for the Denver metro area.
Of course, that 1% is after double-digit price increases during the pandemic, when interest rates were low and demand to move was high. Now the average interest rate on a 30-year loan is close to 7%. And at these prices, a lot of would-be buyers just can't afford that monthly payment.
Jake Krimmel is senior economist at Realtor.com. He says nationally, inventory is up about 30 percent from a year ago. So what this means is that we're shifting from a market that was very much a seller's market coming out of the pandemic into something that's a little more balanced. Krimmel chalks up the higher inventory to another factor. You've probably heard about the mortgage lock-in effect.
Homeowners who borrowed or refinanced when interest rates were super low have been reluctant to move and pay today's much higher rates for a new loan. But Kreml says that's faded somewhat over time. Life happens. And eventually people, because of new jobs, kids, things like that, folks eventually have to go and search for a home. And put theirs up for sale.
Krimmel says there are some big regional differences. A pandemic-era building boom in states like Texas and Florida has increased the housing supply and the Sunbelt. Meanwhile, the Northeast is still seeing really sort of tight supply, lower inventory, and faster sales. So there's definitely a divergence in what's going on in the data and also in the experiences of buyers in these two different types of places.
In Bloomington, Indiana, broker Juan Carlos Carasquel says the market has been pretty flat for about a year. I think it's cost of living in general. Not only are prices higher, he says, that's pushed up property taxes. We also have experienced nationwide an increase in insurance costs. So just cost of ownership has increased significantly.
A cloud of uncertainty about where the economy is headed is also weighing on would-be buyers. Carrasquel says where the market goes from here hinges on interest rates. When they dipped closer to 6% for a brief moment back in the fall, sales picked up. That's a very clear example of how rates made a difference from people to say, OK, let's do it now because the rates are a little bit lower.
Where interest rates are going is anyone's guess. See above regarding economic uncertainty. To my fellow home shoppers, good luck. I'm Amy Scott for Marketplace. Here's the Marketplace macroeconomic data point of the day. It comes to us from the Census Bureau, which says the biggest cities in this country are getting even bigger.
From 2023 to 2024, the Census Bureau says almost every major urban center gained in population. That is, of course, quite the change from the early days of the pandemic when a lot of city folk opted for suburbs and rural areas with more open spaces. Daniel Ackerman looked into what's driving this urban rebound and what it might mean for the economy.
Cities create a disproportionate share of economic growth in the U.S., says Esteban Moro, director of the Urban Networks Lab at Northeastern University. He says nothing beats being around other people. In terms of job creation, opportunities, innovation. Moro says cities produce higher salaries, more startups, even more patents per capita. That's why Gianpaolo Baiocchi, director of the Urban Democracy Lab at NYU, is excited that more people are living in them.
There was this talk a few years ago that cities were going to die and cities are back.
Their growth was fueled in large part by immigration, which Biaki says helps with an aging urban workforce. It's keeping the population young, which means we can have a solid social security system, we can have a solid Medicare and these kinds of things. Of course, a booming urban population can lead to some growing pains. Yeah, I mean, there's always two sides to it. I'm an economist.
Hannah Scoville is with the Metro Denver Economic Development Corporation. And she says while fast growth has helped ease a labor shortage, it's exacerbated a housing one. What we saw in previous decades, we were growing too fast and we can't keep up with the pace of household formation. Perhaps the most dramatic example of the changing economic fortune of cities is New York. It lost more people in absolute numbers than any other during the first year of the pandemic.
Then last year, it gained more than any other. It helps significantly that New York City is growing again. That bolsters our tax base. It helps make sure that our fundamentals are strong. But, says Eli Dvorkin with the Center for an Urban Future, Without tackling that affordability challenge with major housing construction, we're not going to be able to retain the folks that are moving to New York. Dvorkin says the urban economic engine only works when you've got the people to fuel it. I'm Daniel Ackerman for Marketplace.
Coming up. Most reservation companies are now controlled essentially by credit card companies. The battle for your bookings. But first, let's do the numbers. Music.
Dow Industrial is basically flat today, 41,859. The Nasdaq found 53 points in the couch cushions, about three-tenths percent, 18,925. S&P 500 down just two points, 58 and 42. Advanced auto parts revved up 57% the day after reporting quarterly sales that were better than expected. Turns out the company just lost less per share than analysts thought it would lose.
Capitalism on my right. The parent company of Napa Auto Parts, GPC, also rose today by just 1.4%.
O'Reilly Auto Parts, I cannot sing the jingle here. I know you're waiting for it, but I can't. Ran a little low on gas, trimming off four-tenths of one percent today. That big house tax bill that passed overnight would phase out clean energy incentives pretty quickly. Thus, next era energy chopped off 6.4 percent. First solar dimmed 4.3 percent. You're listening to Marketplace. In honor of Military Appreciation Month, Verizon thought of a lot of different ways we could show our appreciation, like rolling out the red carpet.
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This is Marketplace. I'm Kai Risdahl. We're going to dip our toe back in the housing market here for a second. Amy Scott was telling us about her own adventure in housing and the challenges of this year's spring home buying season. Lots of homes on the market, not so much buying. But there is something else going on out there as well. As Marketplace's Samantha Fields reports, even though inventory is up, a lot of people who want to buy can't afford a lot of the houses that are up for sale.
Just five years ago, someone making $75,000 a year could afford about half of the homes for sale around the country. Today, someone making that salary can only afford about 20% of homes. So that's a massive difference. Nadia Evangeliou is with the National Association of Realtors, which did this study. She says that pre-COVID housing market was pretty balanced for middle-income buyers. Now, not so much.
And that's because the homes coming onto the market aren't always priced where the demand is. In fact, in many places, we're still seeing a huge mismatch between income levels and what's available to buy. In a balanced market, households making about $100,000 a year should be able to afford 60% of homes. Today, they find less than 40% within reach. Susan Wachter at the University of Pennsylvania's Wharton School says this is relatively unusual for the U.S.,
We were blessed in America to have a quote-unquote balanced market for many decades. You know, different periods, better or worse, but it's now clear that we're in a different housing regime. One where supply is nowhere near meeting demand and isn't on track to catch up anytime soon.
Not nationally, anyway. But Wachter says... We don't buy houses in America. You buy houses in a particular market. And there are certain areas, namely small and mid-sized cities in the Midwest and South, where the housing market is coming back into better balance. But Lisa Sturdivant, chief economist at Bright MLS, says they're not necessarily the places people most need or want to live.
We have seen from census data and from other data that the bigger metro areas have been attracting more jobs and more people over the last year. And in the places where jobs are growing faster, where population is being attracted to, that affordability picture has not improved as much. And she says that could become an increasingly big issue. Those regions who want to attract jobs, want to attract workers, are going to find it's going to be harder and harder. If there aren't places those workers can afford to live.
I'm Samantha Fields for Marketplace. You want to go out to eat nowadays, you pull out your phone, you fire up one of the two big restaurant reservation apps, and you figure out who's got a spot for you. Turns out, though, that which of those apps you use, OpenTable or Resi, kind of depends on what kind of restaurant you are trying to get into. Priya Krishna writes on food for the New York Times. Good to have you back on the program again. Thank you for having me again. For those unfamiliar...
Give us a primer, would you, on OpenTable and Resi, what the difference is and what the reputation, I suppose, is.
Sure. So OpenTable and Resi are two reservation platforms. OpenTable is far bigger than Resi. It's got about 60,000 restaurants, whereas Resi has 20,000 restaurants. And for a long time, the reputation was that Resi had kind of the cooler, hotter restaurants, and OpenTable had kind of the lower to mid-market restaurants.
Or at least that was the reputation for a long time. Right. Probably explains why I'm an Open Table guy. But anyway, now Open Table has decided they want those resi cooler, hipper restaurants. How are they going about it? Um.
Um, it's very simple cash. They are just throwing money at what it considers to be the hottest, trendiest, most popular restaurants in major dining cities. Uh, tell me, would you, about the, the Mexican restaurant you start this piece with, uh, New Orleans, uh, Superbowl like weekend, right? Yeah. So basically what happened was during one of the busiest times in New Orleans, which was Superbowl weekend this past February, um,
the owners of Akamaya, which is a really, really popular restaurant in New Orleans, realized that there had been a glitch in Resi, their reservation system. And basically, they had been unable to book tables. And so on what was supposed to be the busiest weekend of the year,
Their books were empty. And then just as that happened, an OpenTable employee walks into the door with a cooler of Gatorade and candy, says, I have no agenda. Good luck for the weekend. And a little bit after that, that OpenTable rep reaches out and says,
Switch to OpenTable, set aside a few reservations for premium visa customers, and we will give you a one-time payment. And I spoke to restaurateurs that threw out numbers ranging from $40,000 all the way up to close to six figures. Where are they getting this money, OpenTable?
credit card companies. That is the simple answer. I don't think a lot of people realize that most reservation companies are now controlled essentially by credit card companies. OpenTable has a partnership with Visa, and Resi is owned by American Express. And so what you've got is people whose business is food, restaurateurs, right, who are
You know, I mean, food is a it's like an artistic kind of thing sometimes. They're now they're now basically the pawns in between giant credit card companies. Exactly. And I think what it's showing is how much food and restaurants matter to credit card companies. I saw a report that said is the number one planned spending category for younger consumers ages 18 to 24. So this is obviously something that credit card companies want to capture. How do the chefs and the restaurant owners feel?
feel about this? Because it's a little bit rock and a hard place, right? You want people to come in, but you have to sort of sign up with one side or the other. I mean, I think that most of these restaurants...
feel strange about being pawns in these credit card wars, but they honestly feel very grateful for the financial support at a time when ingredient and labor costs have never been higher, when the future of the economy isn't certain. I mean, restaurants typically operate on razor-thin margins, and credit card companies, on the other hand, are these multi-billion dollar enterprises. And cash is good, I suppose. You are the interim restaurant critic for the New York Times. Yes.
Yes. I don't know how The Times makes its restaurant reservations, but do you have thoughts one way or the other on Open Table versus Resi and how this all works out in real life? I think the biggest takeaway for me as a diner is that I am not loyal to a reservation company. I am loyal to a restaurant. So if there is a restaurant that I want to go to, it doesn't matter to me which platform they are on. The platform for me is a merely incidental part of the experience.
Do I think that both of these, all of these companies could be doing a better job to make the experience more friendly for users like me? Yes, definitely. But I feel no loyalty to one platform over the other. One imagines these platforms will eventually merge and there will just be one option, right? I hope not. I'm just saying that's the way things go. Priya Krishna at the New York Times. Priya, thanks very much. Thank you so much. Thank you.
This final note on the way out today in which it turns out the Federal Reserve really is different. Late this afternoon, the Supreme Court let stand for now President Trump's firing of members of two independent federal agencies, the National Labor Relations Board and the Merit Systems Protection Board, until the case can be decided on the merits. Another federal agency, the head of which the president has threatened repeatedly to fire and which brought a lot of attention to this case,
Yes, the Federal Reserve won Jerome Powell. But as predicted on this program, when I talked to University of Michigan Law Professor Leah Littman a month or two ago, the court has made a carve out for the central bank, quoting the stay here. The Federal Reserve is a uniquely structured quasi private entity that follows in the distinct historical tradition of the first and second banks of the United States. End of quote. Seems then that.
that the justices don't want economic calamity either. John Gordon, Noykar, Amanda Peacher, and Stephanie Seek are the Marketplace editing staff. Amir Babawi is the managing editor. And I'm Kai Risdahl. We will see you tomorrow, everybody. This is APM.
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